We Think Graphene Manufacturing Group (CVE:GMG) Can Easily Afford To Drive Business Growth
Just because a business does not make any money, does not mean that the stock will go down. Indeed, Graphene Manufacturing Group (CVE:GMG) stock is up 178% in the last year, providing strong gains for shareholders. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
Given its strong share price performance, we think it's worthwhile for Graphene Manufacturing Group shareholders to consider whether its cash burn is concerning. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
How Long Is Graphene Manufacturing Group's Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2026, Graphene Manufacturing Group had AU$15m in cash, and was debt-free. In the last year, its cash burn was AU$10m. Therefore, from March 2026 it had roughly 17 months of cash runway. Importantly, though, the one analyst we see covering the stock thinks that Graphene Manufacturing Group will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.
View our latest analysis for Graphene Manufacturing Group
How Is Graphene Manufacturing Group's Cash Burn Changing Over Time?
Whilst it's great to see that Graphene Manufacturing Group has already begun generating revenue from operations, last year it only produced AU$414k, so we don't think it is generating significant revenue, at this point. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. In fact, it ramped its spending strongly over the last year, increasing cash burn by 140%. It's fair to say that sort of rate of increase cannot be maintained for very long, without putting pressure on the balance sheet. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
Can Graphene Manufacturing Group Raise More Cash Easily?
While Graphene Manufacturing Group does have a solid cash runway, its cash burn trajectory may have some shareholders thinking ahead to when the company may need to raise more cash. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
Since it has a market capitalisation of AU$289m, Graphene Manufacturing Group's AU$10m in cash burn equates to about 3.6% of its market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.
So, Should We Worry About Graphene Manufacturing Group's Cash Burn?
It may already be apparent to you that we're relatively comfortable with the way Graphene Manufacturing Group is burning through its cash. In particular, we think its cash burn relative to its market cap stands out as evidence that the company is well on top of its spending. While we must concede that its increasing cash burn is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. It's clearly very positive to see that at least one analyst is forecasting the company will break even fairly soon. Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 2 warning signs for Graphene Manufacturing Group that potential shareholders should take into account before putting money into a stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.